Refer to the following:
The price of capital is $12 per unit.

-If the price of labor increases to $40 per unit and total cost is unchanged, what is the maximum amount of output the firm can produce?
A) 100 units of output
B) 200 units of output
C) 300 units of output
D) 400 units of output
E) none of the above

Question

Refer to the following:
The price of capital is $12 per unit.
 
-If the price of labor increases to $40 per unit and total cost is unchanged, what is the maximum amount of output the firm can produce?
A) 100 units of output 
B) 200 units of output 
C) 300 units of output 
D) 400 units of output 
E) none of the above

Quizplus · Accepted Answer

If the price of labor increases and total cost is unchanged, the firm must reduce its use of labor. This means that the firm can produce less output. The maximum amount of output the firm can produce is 100 units.

Refer to the Following